Hemoglobin switching provides a model system to study the developmental and stage specific regulation of gene expression. Reactivation of fetal hemoglobin production remains an important strategy for treatment of sickle cell anemia and thalassemia. We examine erythropoietin stimulation of erythroid progenitor cells to identify interactions of transcription factors important in erythroid differentiation. In bone marrow, differentiating erythroid progenitor cells and mature erythrocytes are found in close proximity to vascular structures, and early progenitor cells are localized more distally, allowing for variation in oxygen tension in the microenvironment. We found that oxygen tension modulates proliferation and globin gene expression in human primary erythroid progenitor cells stimulated by erythropoietin to undergo erythroid differentiation. Gamma-globin gene expression is induced at low oxygen tension with an increase of up to 400%. Transcription factors important in erythroid differentiation, the zinc finger transcription factor GATA-1, the basic-helix-loop-helix protein SCL/Tal1, and the beta-globin specific EKLF are induced by erythropoietin during adult erythropoiesis, and their induction is delayed and decreased by hypoxia. GATA-2 plays a critical role in the proliferation and survival of early erythroid progenitor cells. Its down regulation by erythropoietin remains unchanged by hypoxia. Hypoxia appeared to affect primarily the balance between gamma-globin and beta-globin production and minimal changes were observed in benzidine staining, a marker of erythroid differentiation (hemoglobinization). Induction of gamma-globin by hypoxia was observed in all primary hematopoietic cultures at low oxygen, and the level of induction was associated with the greatest amount of fetal hemoglobin at normoxia. These data suggest that the heterogeneity in fetal hemoglobin in adult erythroid populations results in part from differences in GATA-1, SCL/Tal1 and EKLF expression due to variation in oxygen tension in the microenvironment of the bone marrow. We have previously found that during erythroid differentiation, over expression of GATA-1 decreases GATA-2 expression and transactivates the erythropoietin receptor and globin gene expression, and at high levels, can increase cell proliferation. In contrast, over expression of GATA-2 induces the megakaryocytic phenotype. To determine the down stream targets of SCL/Tal1, we used an in vitro DNA binding assay combined with in vivo chromatin immunoprecipitation. We identified a satellite repeat with a core transcription factor binding motif containing two E boxes (for SCL/Tal1 binding), a GATA binding motif, and a binding motif for the matrix attachment region binding protein, SATB1. This satellite repeat is found in the retinoic acid receptor beta gene and represses transcription from the retinoic acid receptor beta promoter as well as other promoter. Over expression of SCL/Tal1 reduces expression of the retinoic acid receptor beta suggesting a new role for SCL/Tal1 as a repressor of gene expression and linking it to the retinoic acid-signaling pathway during erythroid differentiation. SATB1 has been associated with both activation and repression of gene activity, and SATB1 peaks during early erythropoiesis. We found that SATB1 can associate directly with Tal1 and possibly mediates binding of SCL/Tal1 to satellite DNA. In addition, SATB1 can bind directly to proposed matrix attachment regions within the beta-globin cluster and alter histone acetylation and methylation. Over expression of SATB1 and SATB1 antisense oligonucleotides can alter globin gene expression, providing evidence for its role in hemoglobin switching and suggesting a new target for manipulation of fetal hemoglobin production.